Dees Stribling, Contributing Editor
Chicago–“It’s been a great six months for apartment market fundamentals,” Jay Spivey, senior director of analytics at CoStar, said at the company sponsored webinar titled “The State of the U.S. Multi-Family Market: Mid-Year 2010 Review & Forecast,” held this week.
“Vacancies fell in the largest markets 30 basis points in the first six months of 2010,” he noted, adding that “during the calendar year 2009, there was negative demand for apartments and it was the single-worst year for absorption of apartments since 1982. This year, we’ve seen positive absorption.”
Moreover, Spivey said, some of the hardest-hit residential markets have seen the strongest demand for apartments in the first half of this year. “Why? Homeownership is back to 1999 levels, for one thing, and those looking to buy a house are finding tighter underwriting standards for mortgages,” he noted.
“The home ownership rate has fallen, and what’s bad for single-family has been good for multifamily,” said Norm Miller, vice president of analytics, another participant in the webinar, along with CoStar global strategist Michael Cohen. “Each percent represents 1.15 million households, so we’ve seen about 3.5 million households go from ownership to the rental market. ”
U.S. households are also being formed because job creation is under way. Job creation might not be fast enough to make the country feel better about the economy, but it is fast enough to allow many of those new job holders to seek out their own places to live. “The economy has created 900,000 jobs in the last six months, 600,000 of those in the private sector,” said Spivey. “That’s driving household formation.”
There are psychological factors at work in increasing demand, too. “Some people are plain sick of living with their families, and are moving out if at all possible,” said Spivey.
On the supply side, not much is being built, the webinar participants explained–another factor that bodes well for the apartment industry. “It’s an even better picture when you add normal rental market growth, especially in light of the very small supply of new product,” said Miller.